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+--- Thread: SECP directives to end floor-price rule by Friday (/showthread.php?tid=1984)
SECP directives to end floor-price rule by Friday - Naveed Yaseen - 12-10-2008 03:28 AM
By Salman Siddiqui
KARACHI: The SECP and stock market’s guns are silent for now since chairman of the apex regulatory body left Saturday’s (Dec 06) meeting inconclusive with his last words on record that he would himself issue directives on floor in a day or two.
“No communication has been built so far from both sides of the fence i.e. (1) Securities & Exchange Commission of Pakistan (SEC), and (2) the officials of local bourses, and none of them tried to approach each others on the issue of floor,” officials of two sides verified to The News.
SECP officials, however, endorsed that directives to end the floor-price rule on Dec 15 would be sent to the three local bourses last by Friday, Dec 12.
“The SECP does not work on government holidays and the issuance of directive would not be delayed beyond Dec 12,” they reiterated.
The staff of the Commission would resume office on coming Thursday, Dec 11, after celebrating Eid, it was learnt.
“Local bourses i.e. Karachi, Lahore and Islamabad do not have powers more than the apex regulatory body and if SECP has once issued directives in any regard then bourses have to comply it.
This is the Commission’s legal position,” replied a Commission-Director.
Floor to stay beyond Dec 15: A member-director on KSE Board, however, was of the firm belief that floor-mechanism would stay beyond the verbally given deadline of Dec 15 by SECP.
As far as the question of SECP directives on floor is concerned then they would only be acceptable to the bourse if directive were included an applicable solution regarding the leverage market, he added.
If SECP ruling would be of one line sentence like “Remove the floor on Dec 15”, and included nothing else like how to resolve the issue of massive leveraging in market then markets have a right to approach the Supreme Court and obtain a stay order.
“According to the hierarchy of our legal system, Supreme Court holds the top-most position in Pakistan and it is also over and above any apex regulatory body e.g. SECP,” explained the director.
“Moreover, the Board of Directors of Karachi Stock Exchange (KSE) has powers to shut the market down and this is our legal position,” he replied.
“We will decide what to do ahead of SECP directives if are issued to us. Otherwise we have held no internal (formal or informal) nor the any external meetings since Saturday, Dec 06,” he said. He affirmed that Board of Directors of Karachi Stock Exchange Board will not let its members down owing to their weak financial positions and only an applicable solution can convince market representatives to act in compliance with SECP directives.
Officials of both the sides, however, said that what so ever measures would be taken at markets, they will be taken in accordance with ‘mutual consent’, which is the past practice of two regulators (i.e. SECP & other bourses),
Extension in CFS rollover likely: One of the applicable solutions that the three bourses had put before SECP-Chairman Razi-ur-Reham was the extension in CFS rollover period by six moths and KSE Board expects this to be included in the directives, which are heard to be issued by Commission regarding floor removal.
This complicated situation emerged after IMF barred government from using public money to bailout a cash-starved stocks market last week.
Markets have entered into the fourth month under floor-rule since it was introduced on Aug 27.
The reason for imposing floor was to escape from likely default situation by the market members, as KSE 100-share Index had fallen by about 41 per cent amid an outflow of about Rs2 trillion market capitalisation by Aug 27 from its peak position of 15,676 points on April 18, this year. At current, market is still staying around Aug 27’s floored position.
http://www.thenews.com.pk/daily_detail.asp?id=151234